Inflation still poses threat to Indian economy: FM

New Delhi, Mar 3: Union Finance Minister P Chidambaram on Monday soaring prices of food is the chief reason for inflation still being threat to the economy of the country.

"One of the reasons why inflation is still a threat is because of food price inflation," Chidambaram told a gathering of businessmen here. "If we grow enough food to feed our people, we are insulated from world prices, but if we are dependent on imports we are subject to world prices," he added. The annual inflation rate rose to 4.89 per cent in mid-February. Chidambaram also said that since April 2007prices of wheat had witnessed a jump of 88 per cent across the globe and rice prices had increased by 15 per cent.

He said that to give a boost to stagnating agriculture sector and to contain the problem of inflation he proposed waiver of agri-loan in the General Budget 2008-09.

"Taking all this into account, we came to the conclusion that the distress of the farmers calls for an unorthodox response. And the response was the agri loan waiver," Chidambaram said.

He had announced a 600-billion rupees package to waive off farm-loan in order to reinvigorate the agriculture sector.

Talking about industrial sector, Chidambaram said : "You have my word that if any sector faces difficulties, if there is any signal that growth is flagging in some sectors, government will certainly step in and try to see what can be done to that sector."

On turbulent scenario of the stock markets, he said, "Asian markets have slipped today because of fears of recession in the US, what is happening in India shows that we are not as decoupled as we think we are."

"I dont think we need to worry too much about that. This is really reflecting what is happening in the world market," he added.